The total value of Irish pension funds reached a five-year peak of €137.9 billion at the end of the first quarter, the Central Bank reported on Thursday. Meanwhile, liabilities continued to grow.
In addition, the number of people participating in a pension scheme rose to 1.65 million by the end of the previous year. Compared to the figures initially reported by the Central Bank in the third quarter of 2019, this constitutes a 6% increase in the last year and nearly 21% growth from the number of people registered in an occupational pension scheme in 2019.
On average, a pension fund is valued at little over €80,000, based on the reported statistics. But this average obscures a broad range of variability. The range includes people who are at different stages of their retirement planning and the salary-based differentiated pension contributions.
Of the 1.65 million pension scheme members, less than half, approximately 781,000 or 47%, are actively contributing to their pension fund. A roughly similar number are deferred members, those who have switched jobs and ceased contributions to a specific scheme but have not yet retired.
This calculation results in some degree of duplication as many individuals may be deferred members under one scheme while being active contributors in another scheme managed by their current employer.
As of the end of 2023, nearly 102,000 individuals had retired and begun receiving their benefits, according to the data.
Pension fund liabilities amounted to €130.7 billion at the end of March. Over half of this were liabilities of defined contribution pension schemes – the prevalent model in today’s workplace, which determines pension payout based on the employer and employee’s investment amount and its resultant performance.
The remainder is associated with prior defined benefit pension schemes that calculated a pension based on service tenure and wage. Although defined contribution schemes represent more than three quarters of all active pension fund participants, it was only last autumn that assets in these plans surpassed those in defined benefit funds.
There has been a striking alteration in the placement of funds by pension fund managers, as indicated by the data. A remarkable escalation in the allocation to hedge funds by 73% on the quarter, equating to €5.9 billion, was recorded. Concurrently, funds vested in equity (reducing by 30 per cent to €6.6 billion) and property funds touched a five-year low.
Primarily, the wealth of the pension fund is funnelled into debt securities, predominantly bonds and bond funds. Nearly 70 per cent of the investment in debt security is made up of Eurozone bonds. Irish debt represents 12.5 percent and the remaining 19 percent is funded by the rest of the world. Similarly in equities, close to 79 percent is assigned to non-euro zone nations, 6.3 percent to Irish equity funds and 15 percent is directed towards euro zone-focused funds.
For the present, pension fund assets are down only slightly compared to the value in September 2019, the time when the Central Bank began posting data. However, the funds are over 20% more than the amount of €107.8 billion in September 2022.
In terms of liabilities, there has been a 15 percent increase from the €119.8 billion mark in 2019. The Central Bank states that these liabilities plummeted to as low as €112.8 billion in March 2020. The portfolio of Irish occupational pension funds has maintained a positive overall balance since the start of 2022, currently standing at €7.2 billion in profit as a collective. However, this number has taken a steep dive from the surplus of over €9 billion recorded at the close of last year.